9/25/2008 @ 8:40AM

Daimler Looks To Shake Chrysler Stake

German car maker Daimler was preparing Thursday to unload the heavy burden of its 19.9% stake at ailing America rival Chrysler, the firm’s former subsidiary.

Cerberus Capital Management, which bought 80.1.0% of Chrysler a year ago for $7.4 billion, said it was in negotiations to buy Daimler’s remaining stake of Chrysler, ending a 10-year long combination.

Over the last year, Chrysler has been a rumored takeover target as it struggles with low truck sales and a sharper consumer slowdown in a battered U.S. economy. (See “Can Chrysler Woo Fiat?”) But Cerberus has said Chrysler constituted a long-term investment.

Daimler said it was in talks with Cerberus but it didn’t give any further details for a possible sale, according to several news reports. Industry analysts said it was about time Daimler got rid of its Chrysler shares.

“As Chrysler troubles deepen, it doesnt make any sense for Daimler to have that stake,” said Michael Tyndall, an analyst with Nomura International, in London. “Life is not very good for Chrysler. It faces a number of substantial challenges as it is almost exclusively relying in the U.S. market, which is in a horrible state, and heavily relying on the sales of light trucks, whose demand has collapsed as gas prices increase.”

Shares of
Daimler
rose 0.3%, or 10 euro cents (15 cents), to 38.50 euros ($56.43) in morning trading, in Frankfurt. But its stock has fallen 39.0% so far this year in line with the rest of the industry, which is struggling to stay profitable amid rising oil and raw material prices, a decline in consumer spending and negative currency effects.

Privately owned Chrysler has not officially reported earnings since last August, when it posted a decrease in sales by more than a third year on year. But Cerberus said it finished 2007 with a profit of $9.5 billion, or $1.0 billion more than expected. In February 2007, it laid off 13,000 employees, in an effort to return to profitability in 2008.

After acquiring Chrysler, Daimler lost 187 million euros ($274 million) related to restructuring its rival, and lost an additional 168 million euros ($246 million) after reducing the residual value of Chrysler’s cars.